Disaster Economics

On February 1, 1953, a fierce, sustained storm created a huge surge in the North Sea off the coast of Holland. Floodwaters overtopped the dikes, swallowing half a million acres of land and killing nearly two thousand people. Within weeks of the storm, a government commission issued what came to be known as the Delta Plan, a set of recommendations for flood-control measures. Over the next four decades, the Dutch invested billions of guilders in a vast set of dams and barriers, culminating in the construction of the Maeslant Barrier, an enormous movable seawall to protect the port of Rotterdam. Since the Delta Plan went into effect, the Netherlands has not been flooded by the sea again.

In the aftermath of Hurricane Sandy, which brought havoc to the Northeast and inflicted tens of billions of dollars in damage, it’s overwhelmingly clear that parts of the U.S. need a Delta Plan of their own. Sandy was not an isolated incident: only last year, Hurricane Irene caused nearly sixteen billion dollars in damage, and there is a growing consensus that extreme weather events are becoming more common and more damaging. The annual cost of natural disasters in the U.S. has doubled over the past two decades. Instead of just cleaning up after disasters hit, we would be wise to follow the Dutch, and take steps to make them less destructive in the first place.

There is no dearth of promising ideas out there, such as building a seawall beyond the Verrazano-Narrows Bridge (the Dutch engineering firm Arcadis has proposed a movable barrier, like the Rotterdam one), burying power lines in vulnerable areas, and elevating buildings and subway entrances. The question is whether we can find the political will to invest in such ideas. Although New York politicians like the City Council Speaker, Christine Quinn, and Governor Andrew Cuomo have called for major new investment in disaster prevention, reports from Washington suggest that Congress will be more willing to spend money on relief than on preparedness. That’s what history would lead you to expect: for the most part, the U.S. has shown a marked bias toward relieving victims of disaster, while underinvesting in prevention. A study by the economist Andrew Healy and the political scientist Neil Malhotra showed that, between 1985 and 2004, the government spent annually, on average, fifteen times as much on disaster relief as on preparedness.

Politically speaking, it’s always easier to shell out money for a disaster that has already happened, with clearly identifiable victims, than to invest money in protecting against something that may or may not happen in the future. Healy and Malhotra found that voters reward politicians for spending money on post-disaster cleanup, but not for investing in disaster prevention, and it’s only natural that politicians respond to this incentive. The federal system complicates matters, too: local governments want decision-making authority, but major disaster-prevention projects are bound to require federal money. And much crucial infrastructure in the U.S. is owned by the private sector, not the government, which makes it harder to do something like bury power lines.

These are genuine hurdles, and safeguarding the great expanse of the Atlantic coast is a much more expensive proposition than defending Holland’s smaller one. But there’s a more basic problem: the U.S., as a rule, tends to underinvest in public infrastructure. We’ve been skimping on maintenance of roads and bridges for decades. In 2009, the American Society of Civil Engineers gave our infrastructure a D grade, and estimated that we’d need $2.2 trillion to bring it up to snuff. Our power grid is, by the standards of the developed world, shockingly unreliable. A study by three Carnegie Mellon professors in 2006 found that average annual power outages in the U.S. last four times as long as those in France and seven times as long as those in the Netherlands. (The past two years’ data would likely be even worse.) This isn’t because of a lack of resources—the U.S. is the world’s biggest economy. But, though we may have the coolest twenty-first-century technology in our homes, we’re stuck with mid-twentieth-century roads and wires.

Meaningful disaster-prevention measures will certainly be expensive: estimates for a New York seawall range from ten to twenty billion dollars. That may seem unreasonable at a time when Washington is obsessed with cutting the federal deficit. Yet inaction can be even more expensive—after Katrina, the government had to spend more than a hundred billion dollars on relief and reconstruction—and there are good reasons to believe that disaster-control measures could save money in the long run. The A.S.C.E. estimates that federal spending on levees pays for itself six times over, and studies of other flood-control measures in the developed world find benefit-to-cost ratios of three or four to one. The value for money is even higher in poor countries, where floods obliterate weak infrastructures. And a 2005 independent study of disaster-mitigation grants made by FEMA found that every dollar in grants ended up saving taxpayers $3.65 in avoided costs.

The size of our current deficit does not change this calculus. In fact, there’s never been a better time for a Delta Plan in the U.S. With interest rates so low, it’s cheap to borrow money, and there are plenty of unemployed workers and unused resources that can be put to work. In a time of austerity, there’s bound to be opposition to expensive infrastructure projects. But if the government—and, by extension, taxpayers—is already on the hook for all the damage caused when disasters strike, we owe it to ourselves to do something about how much those disasters cost. ♦